Negotiate the Healthcare Industry

Teach Your Students to Negotiate One of the Largest Global Industries

Healthcare is one of the biggest economies in the world, with billions of dollars spent on treatments and associated research. There are typically significant interests at stake in healthcare negotiations, which are made all the more complex by the presence of both public and private sector actors, many with extensive training and highly-valued skills. The fact that life and death is an issue in many healthcare negotiations makes the stakes even higher.

Role-play simulations available through the Teaching Negotiation Resource Center (TNRC) reflect the breadth and depth of the important negotiations that take place in the healthcare sector. Medical malpractice and liability, as well as hospital budgeting are significant issues in healthcare. Check out these in-depth role-play simulations from the TNRC to teach your students how to negotiate the healthcare industry.

This three-party, one hour negotiation is among hospital committee members over the allocation of scarce life-saving resources. A hospital located in a small town has a serious dilemma: the facility only has two dialysis machines which are now in demand by seven community residents with kidney failure. The patients include: a 33 year-old professional athlete, a middle-aged housewife and mother, a male model in his fifties, a 28 year-old factory worker, a corporate executive in his thirties, a child prodigy, and a middle-aged orthopedic surgeon. Without treatment, each patient will die, but only three patients can use the available machines. The machines are extremely expensive, and money to buy a third, let alone a fourth, is simply unavailable at this time. Accommodating more patients for fewer hours subjects each patient to substantially greater risk, and can postpone a choice for no longer than a week or two. The members of the Kidney Dialysis Committee are members of the community who have been asked to serve by the hospital administration. They have been given information about each patient, and have been asked to decide, confidentially, who will and who won’t receive treatment. Major lessons of this simulation include:

The intensity of the psychological dimension adds considerable power to struggles over group process and control.

Substantively, the case brings into high relief the question of what constitutes “fairness,” “objective criteria,” and societal “norms,” and the extent to which those concepts can exist outside perceptions colored by our personal values.

This six-person, five hour, intensive negotiation is among hospital administration and employee representatives to reach consensus on budget cuts in three departments. Dr. Van Hagen, a distinguished heart surgeon, will soon join the staff at Newtowne Hospital, a 750 bed teaching institution. Although some staff members are elated and perceive the arrival of the doctor as an indication of the hospital’s coming-of-age, other staff members are in shock. Newtowne is already facing financial difficulties, including the fact that the annual wage increase for staff has not kept up with the cost-of-living. Now that the hospital has promised financial support to Dr. Van Hagen and his special staff, and will also fund his new equipment, Newtowne is going to have to cut $3.5 million from the rest of its budget. John Demars, the Chief Operating Officer, has met privately with five people who will serve as a budget advisory committee. The five members: the Chief of the Medical staff, Vice-President of Nursing, Chief Financial officer, Head of the Nurses Union, and president of the Hospital Workers Association all were a bit angry and worried about suggested cuts in their departmental budgets. Demars has asked the Advisory Committee to try to reach a consensus on the budget cuts. If no agreement is reached, the Chief Financial Officer will submit his own recommendation to the hospital Board of Directors. Major lessons of this simulation include:

Relationships: Relationships are a key issue in this case. In order to keep the hospital running smoothly, the players must remain accountable to their constituents while maintaining a good working rapport with each other.

Identifying ‘Success’: During post-negotiation discussions, participants can take a close look at the different notions of a good outcome in each of the negotiating groups. did the parties try to accommodate each other’s interest? What were the results when they did?

Positions vs. Interests: The parties must separate their interests from their positions, as well as the people from the problem in order to reach a consensus in a distributive bargaining situation.

This three-party, three hour, multi-issue contract negotiation is among representatives for an HMO and two pharmaceutical companies over the purchase of a new antidepressant drug. Hopkins HMO is the largest independently managed health care organization in the region. PharmaCare, Inc., a newly-formed pharmaceutical company, has just introduced “Profelice,” the first commercially-approved antidepressant treatment of its type. Profelice is expected to replace Prozac and Zoloft due to increased efficacy and reduced side effects. The Managed Care Representative for PharmaCare and the Pharmacy Director for Hopkins HMO have held several preliminary meetings over a contract for Profelice, but have made no commitments. The key issues to be negotiated include market share target tiers for Hopkins HMO, the discount pricing schedule for Profelice, marketing support, Profelice’s formulary status, and the length of the agreement. The PharmaCare Managed Care Rep and the Hopkins HMO Pharmacy Director are meeting with PharmaCare’s Contract and Pricing Manager to try to finalize the agreement. Major lessons of this simulation include:

How perceptions of power can affect an agreement,

The importance of understanding interests to developing a mutually beneficial agreement,

This five-party, three hour, multi-issue negotiation is among foundation, community, and medical board members of a new health foundation to set community health funding priorities and strategies for community engagement. The Blueville Health Foundation (BHF) has recently been created to fund health initiatives in the Blueville Area. The BHF is run by a five-member Executive Committee. The Executive Committee of the Board has been charged to set priorities for funding health projects. Unfortunately, the members of the Executive Committee have struggled with how to identify community health issues that need funding, how to engage the community in this process, or even how best to interact among themselves to meet their Foundation responsibilities. To help the process along, the newly hired Executive Director of BHF commissioned a ‘community health needs assessment’ to help determine priorities. Based on this assessment and discussions with Executive Committee members, the Executive Director has put together a proposal to help move along the process so that quick decisions can be made. This meeting of the Executive Committee has been arranged to discuss the proposal and to make final decisions on the first round of funding. Additionally, the committee members will need to decide on an approach to community participation for future Foundation grant allocation priority setting and decision-making.

TNRC negotiation exercises and teaching materials are designed for educational purposes. They are used in college classroom settings or corporate training settings; used by mediators and facilitators seeking to introduce their clients to a process or issue; and used by individuals who want to enhance their negotiation skills and knowledge.

Negotiation exercises and role-play simulations introduce participants to new negotiation and dispute resolution tools, techniques and strategies. Our videos, books, case studies, and periodicals are also a helpful way of introducing students to key concepts while addressing the theory and practice of negotiation and conflict management.

Which negotiation exercises have helped you? Let us know in the comments.

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Preparing for Negotiation

Understanding how to arrange the meeting space is a key aspect of preparing for negotiation. In this video, Professor Guhan Subramanian discusses a real world example of how seating arrangements can influence a negotiator’s success. This discussion was held at the 3 day executive education workshop for senior executives at the Program on Negotiation at Harvard Law School.

Guhan Subramanian is the Professor of Law and Business at the Harvard Law School and Professor of Business Law at the Harvard Business School.